Maine to receive $49 million more in revenue than expected, but budget problems remain

AUGUSTA, Maine – Lawmakers got some good news from the revenue forecasting committee Monday: Over the rest of the two-year budget cycle they can expect about $49 million more than was forecast earlier this year. The bad news is this is well short of what is needed to bring the budget into balance for 2013, when tax cuts begin to lower state revenues.

“Most of that is sales taxes and the corporate income tax doing better,” said Mike Allen, chairman of the committee and associate commissioner for tax policy at Maine Revenue Services.

“When those revenues are accounted for you can see the continued growth every month in the sales tax,” Allen said. “We are seeing growth, but it is very slow growth and that is reflected in our report.”

He said although there is another day for April revenues to be processed, it is clear that the month will end several million dollars above estimates.

“We did not have any April surprise, good or bad, “ Allen said Monday.

Because of the April filing deadline for personal income taxes, there have been years in the past when revenues have been well below estimates and years when they have been well above estimates. He said this year the individual income tax line is about on target for April, but the group expects slower growth in budget year 2013.

“Remember, we have some substantial tax cuts taking effect next year,” he said. “That slows the growth of the income tax.”

Members of the Appropriations Committee were briefed on the reforecast and say while it is good news, it does not solve the 2013 budget problems they are facing.

“It doesn’t solve the entire budget problem so we have some serious work ahead of us,” said Sen. Richard Rosen, R-Bucksport, co-chairman of the committee. He said the 2013 Medicaid budget shortfall is pegged at $82.5 million, but that could change as the panel reviews the impact of eligibility findings from the Department of Health and Human Services on components of the budget.

He said the supplemental budget may also include other items, such as addressing the two line-item vetoes by Gov. Paul LePage in the previous supplemental budget. The governor eliminated appropriations for expected losses of federal funds for psychiatric hospitals and general assistance because he disagreed with the amounts — not enough for hospitals and too much for general assistance.

“Some of us want to revisit the disproportionate share issue that affects the psychiatric hospitals,” Rosen said. Others on the panel want to restore funding for the general assistance program.

“We are still sorting through the numbers that were brought to us Friday on the ineligibility issue,” said Rep. Peggy Rotundo, D-Lewiston, the lead Democrat on the Appropriations Committee. “We are working with the staff of [the Office of Fiscal and Program Review] to make sure these numbers are accurate as we start work on the 2013 supplemental budget.”

She said many of the governor’s proposals to reduce Medicaid coverage are “toxic” to members of the Democratic caucus and that those discussions will be very difficult for the committee.

“We have a lot of negotiating to do,” she said. “There are a variety of very challenging issues before us that have to be worked through.”

Not all of the revenue reforecast was good news. The projected revenues for the Highway Fund were reduced by $3.2 million in each year of the budget as high gasoline prices contribute to reduced gasoline purchases. That reduction also projects less revenue from fees related to motor vehicles, such as registration fees.

“We don’t see that improving and we have projected that down out into 2014 and 2015,” Allen said.

He said some other minor sources of revenue were projected up or down but have little impact on the overall number.